U.S. defense cut could cost billions to implement

The Pentagon may have to pay billions of dollars in termination fees and other contract penalties if Congress does not stop $500 billion in automatic defense spending cuts due to take effect on January 2, a top weapons industry executive said on Wednesday.

Sean O'Keefe, chief executive of the North American unit of Europe's EADS (EAD.PA), said U.S. defense officials were starting to assess added costs that might be triggered by the automatic cuts required under "sequestration," although they have not begun detailed planning for the across-the-board cuts.

O'Keefe, current chairman of the National Defense Industrial Association trade group, was one of a number of industry executives who met with Defense Secretary Leon Panetta and other top Pentagon officials on Tuesday to discuss the budget cuts.

Most procurement contracts have clauses requiring termination fees that help companies cover initial investments in tooling for new weapons programs and initial materials costs, but industry executives say those fees will not do much to ease the longer-term pain of the cuts facing the industry.

1. I have no problem paying for the penalties...

but in addition, all politicians who proposed and voted for these bad contracts lose all their benefits and pensions. Hey, someone has to pay for these mistakes... public workers all over the country are losing their pensions due to lack of funds... and politicians are public workers, correct?

3. Well

both parties agreed to these cuts as a *penalty* for not coming to some kind of agreement on deficit reduction. The Republicans held the line against any kind of balanced proposal and the "Supercommittee" failed, so now the bitter pill will have to be swallowed. Did they really NOT think about how this would work (or not work for the economy) when they passed the so-called "Budget Control Act"?

4. Soldier pay and weapons will be paid for first

Then housing and utility costs. After that, quality of life and maybe medical care. Then after new construction, maintenance of existing military facilities and civilian pay will compete for what's leftover.

Only the most superficial of weapon dollars will be touched, too many former generals/admirals depend on the extra cash to make ends meet.